Stock Analysis

Earnings Beat: Honda Motor Co., Ltd. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

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Last week saw the newest annual earnings release from Honda Motor Co., Ltd. (TSE:7267), an important milestone in the company's journey to build a stronger business. The result was positive overall - although revenues of JP¥20t were in line with what the analysts predicted, Honda Motor surprised by delivering a statutory profit of JP¥226 per share, modestly greater than expected. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

View our latest analysis for Honda Motor

TSE:7267 Earnings and Revenue Growth May 14th 2024

Taking into account the latest results, the consensus forecast from Honda Motor's 17 analysts is for revenues of JP¥21t in 2025. This reflects a modest 2.1% improvement in revenue compared to the last 12 months. Statutory per-share earnings are expected to be JP¥225, roughly flat on the last 12 months. Before this earnings report, the analysts had been forecasting revenues of JP¥21t and earnings per share (EPS) of JP¥215 in 2025. So the consensus seems to have become somewhat more optimistic on Honda Motor's earnings potential following these results.

The consensus price target was unchanged at JP¥1,971, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Honda Motor at JP¥2,400 per share, while the most bearish prices it at JP¥1,300. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Honda Motor's revenue growth will slow down substantially, with revenues to the end of 2025 expected to display 2.1% growth on an annualised basis. This is compared to a historical growth rate of 5.4% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 3.0% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Honda Motor.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Honda Motor's earnings potential next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Honda Motor's revenue is expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on Honda Motor. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Honda Motor going out to 2027, and you can see them free on our platform here..

It is also worth noting that we have found 1 warning sign for Honda Motor that you need to take into consideration.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.